AIG Issues Subpoenas Against Competitors in Workers’ Comp Dispute

American International Group Inc. has begun sending out subpoenas to workers' compensation competitors in an ongoing legal dispute in which AIG is attempting to justify a racketeering case against companies it claims tried to injure it.

Its legal battle in Chicago federal court is against a long list of firms -- including Liberty Mutual Group, Travelers Insurance Group, Hartford Financial Services Group Inc., Ace INA Holdings Inc. and Sentry Insurance Group -- and it stems from those companies' lawsuit against AIG for what they claim was a history of under-reporting workers' compensation premiums to the National Workers' Compensation Reinsurance Pool.

AIG contends those competitors also engaged in under-reporting premiums and conspired with each other to harm AIG (BestWire, Sept. 28, 2009).

"Certain competitors continue to wage wasteful litigation against AIG while refusing to reveal how much they and others may have under-reported workers' compensation premiums," AIG spokesman Mark Herr, said in a statement. "Given this, AIG has no choice but to issue subpoenas to discover this information and has been given permission by the court to do so."

In January, the court gave AIG permission to send individual subpoenas to the involved companies.

The original lawsuit brought against AIG alleged the other companies had been cheated because AIG wasn't reporting its honest share of premiums -- which were directly tied to how much the company would be responsible for in losses paid. The National Council on Compensation Insurance had accused AIG (NYSE: AIG) of engaging in massive fraud to underpay market assessments over a period of decades. It also argued unfair exclusion from an earlier AIG agreement with New York state regulators to pay $343 million for alleged underpayment of workers' compensation premium taxes and other related fees and assessments (BestWire, March 26, 2008).

On the afternoon of March 17, AIG's stock was trading at $34.07 a share, up 1.37% from the previous close.

Most AIG insurance companies have current Best's Financial Strength Ratings of A (Excellent). Hartford's and Liberty Mutual's insurance companies also currently have A ratings. Sentry's insurance companies, Traveler's companies and most Ace companies currently have A+ (Superior) ratings.

(Jesse A. Hamilton, Washington bureau manager: [email protected])